United fighting to keep lock on its O'Hare gates

The city of Chicago and United Airlines are deadlocked over whether the airline still retains exclusive rights to its showcase terminal at O'Hare International Airport, even though United defaulted on $601 million in airport bonds used to finance the facility.

At stake: whether the city has the right to force United to share its home base at O'Hare with other airlines.

The issue is slated to go to trial Oct. 5 in Bankruptcy Court in Chicago. However, the city and airline are trying to negotiate a resolution after scuttling a settlement reached in early August. "We'd reached an agreement in principle, but couldn't agree on some of the details," says a spokeswoman for the city's Law Department.

United's Terminal 1 is distinctive for its airy, award-winning design by architect Helmut Jahn and the efficiency with which it allows United to handle more than 400 flights daily.

"The two most valuable assets in (United's) whole system are its Pacific routes and Terminal 1 at O'Hare," says Jay Franke, a former Chicago aviation commissioner. "If they lose exclusive rights over that facility, they lose valuable market cachet. It's significantly important, materially important. I would suspect they would fight very, very hard for that."

An airport-use agreement grants the Elk Grove Township-based airline the exclusive use and occupancy of more than 50 gates at O'Hare's Terminal 1 and its neighbor, the shabbier Terminal 2.

However, the airline's continued hold over the space was contingent on it continuing to pay interest on its municipal bond obligations, something United hasn't done since filing for bankruptcy protection in late 2002.

Because United violated its financing covenants, the city contends the airline forfeited its exclusive rights to the gates that make up its largest operating hub. United argues that the financing agreement  including the provision in question  can't be enforced under bankruptcy law, says a United spokeswoman.